SINGAPORE (Reuters) – Singapore’s economy is expected to contract only slightly in the first quarter as activity continues to recover from a pandemic-induced shock, a Reuters poll showed, with the central bank expected to stay pat at its policy review next week.
Gross domestic product (GDP) is expected to contract 0.2% in January-March from the same period a year earlier, according to the median forecast of 10 economists.
The city-state’s economy, which is highly reliant on global trade and financial services, had shrunk 2.4% year-on-year in the fourth quarter of 2020.
For the whole of last year, GDP contracted 5.4%, but is forecast to grow 4% to 6% this year as the global economy gradually recovers, according to official data.
The outlook for manufacturing and exports is positive this year amid resilient demand for semiconductors and electronics products, while construction should rebound, Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said.
“Services will likely see more gradual recovery with more easing of social distancing measures, and as borders start to reopen in the second half of the year to vaccinated travelers,” they added.
Singapore has brought the local COVID-19 situation under control and has been ramping up vaccinations. But analysts say external demand and reopening of international borders is key to growth, with recovery for sectors such as tourism and aviation still some time away.
With the economy slowly getting back on better footing, all 15 economists polled by Reuters forecast the Monetary Authority of Singapore (MAS) will keep its exchange-rate based policy unchanged at its next review on April. 14.
Singapore’s central bank manages monetary policy through exchange rate settings, letting the local dollar rise or fall against the currencies of its main trading partners within an undisclosed band.
It kept policy unchanged at its last review in October, and said its accommodative stance will remain appropriate for some time.
“The MAS is expected to be more optimistic, but not hawkish”, Bank of America Securities’ economist Mohamed Faiz Nagutha wrote in a report. “A full return to pre-COVID GDP levels could still be some years away for the badly-hit sectors.”
(Reporting by Aradhana Aravindan in Singapore; Editing by Kim Coghill)